Shimla: Failing to resolve a decade old dispute over PPP property Hotel Wildflower Hall and the books showing losses that have crossed Rs 100 Cr mark, the Himachal cabinet on Tuesday sought a CAG audit into the accounts of the company.
An official spokesman said, “cabinet approved to entrust audit of M/S Mashobra Resorts Pvt. Ltd. (MRL) to the Comptroller and Auditor General of India (CAG) right from 1995 onwards.”
MRL happens to be Himachal government first private public partnership (PPP) joint venture company with Oberoi Group’s EIH Ltd constituted to put up the five star hotel with an agreed upon 65:35 equity shareholding in 1995.
Whereas the initial was put at Rs 40 crore but by the time Hotel Wildflower Hall came into operation in 2002, the cost of construction was shown at about Rs 100 crore that resulted into a dispute over the states shareholding being reduced from 35 to 21 percent.
Highly placed government sources disclosed that other than the dispute over cost of construction, in 10 years of operation the company books are showing losses of over Rs 100 crore.
The MRL losses have been shown to be made up by loans from promoter company EIH, and with the board dominated by Oberoi group directors, the loans were proposed to be converted into equity, diluting the state’s share further.
In response to a government petition, the courts in September 2010 had restrained Oberoi’s from converting the debt into equity.
Not satisfied with the company’s accounting, the state government had earlier also in April 2011 approached CAG for a special audit of MRL accounts.
The dispute over the project cost had even resulted in an aborted attempt in 2003 by the state to forcibly take over the hotel located on a scenic spur amidst a thickly wooded cedar forest.
The matter went into arbitration and the arbitrator award in 2005 recommended termination of the joint-venture agreement and asked for it to be converted into a leasehold property.
Oberoi’s were asked to pay Rs 94 Crore lease amount over a 40 year period by the arbitrator but the award was challenged by Oberoi’s and has not been settled yet.
Wildflower Hall, 13 Kms from Shimla, in 1902 was the summer residence of Lord Kitchener, a former chief of the Indian army.
At Independence in 1947, the property which was being run as a hotel became a state property that was run by Himachal Tourism.
The old wooden structure burnt down in 1993 and the government after overriding competitive bids entered into a joint-venture agreement with Oberoi group in 1995 to resurrect the hotel.
Among its niche clientele, the hotel regularly plays host to congress president Sonia Gandhi and her daughter Priyanka.